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States Must Perform and Recognize Same-Sex Marriages

The U.S. Supreme Court held last week, in Obergefell v. Hodges, that the U.S. Constitution requires all states to perform same-sex marriages and recognize same-sex marriages lawfully performed in another state. We recommend employers review their employee benefit plans to determine whether they offer coverage to all legally married couples. Additionally, employers may want to consider whether to continue offering domestic partner benefits. Obergefell v. Hodges, No. 14-556, ___ U.S. ___ (June 26, 2015) can be found here.

U.S. Supreme Court Upholds Subsidies on Federal Exchanges

The U.S. Supreme Court held last week, in King v. Burwell, that federal subsidies are available under the Affordable Care Act (“ACA“) to purchase health insurance on a federal exchange. A federal exchange operates in states that have not set up state exchanges. The ACA states that federal subsidies are allowed for taxpayers who meet certain requirements and have enrolled in an insurance plan through “an Exchange established by the State.” IRS regulations had interpreted this provision to make federal subsidies available regardless of whether the exchange is established and operated by the state or the federal government. The Court decided that, although the plain-meaning arguments were strong, the ACA’s context and structure compel the conclusion that federal subsidies are permitted with respect to insurance coverage purchased on any exchange-federal or state. This means business as usual for employers, including managing ACA penalty risks and preparing for the onerous reporting… Continue Reading

Ensure Conveying Discretionary Authority in Plan When Outsourcing Appeals

The FedEx long-term disability plan provided that FedEx would appoint an appeal committee to review appeals and grant this committee with discretionary authority. FedEx claimed that Aetna was appointed as the appeal committee because the FedEx board of directors disbanded the prior appeal committee when the board decided to outsource appeals to Aetna, and FedEx and Aetna amended their service agreement accordingly. The plan did not contain a process for appointing the appeal committee, and the court found that, in order to comply with the plan, the board needed to actually designate Aetna as the appeal committee and there was no evidence of this. Accordingly, the U.S. Court of Appeals for the Fourth Circuit affirmed the district court’s decision to review the denial of long-term disability benefits de novo because the participant’s claim was not reviewed and denied by an entity with discretionary authority over appeals. Bilheimer v. Fed. Express… Continue Reading

IRS Releases Draft ACA Reporting Forms and Guidance on Electronic Filing

The IRS recently released the following draft forms that employers will use to report certain information required by the Affordable Care Act (the “ACA“): Form 1094-B (Transmittal of Health Coverage Information Returns); Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns); Form 1095-B (Health Coverage); and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage). For more information on these forms and reporting required under the ACA, please see our prior newsletter post here. These ACA forms must be filed electronically with the IRS on the new Affordable Care Act Information Return (“AIR“) system, rather than on the Filing Information Returns Electronically (“FIRE“) system that is used to file other returns with the IRS. Employers that intend to directly file using the AIR system, rather than having a third party file on their behalf, should review the new IRS guidance on the AIR system to ensure that the employer can submit… Continue Reading

Reminder: Upcoming July 6 Deadline to Register Share Plans in the United Kingdom

July 6, 2015 is the deadline to register and self-certify share-based incentive plans or schemes, whether tax-advantaged or non-tax-advantaged, that are sponsored or maintained by companies for the benefit of their employees in the United Kingdom (“U.K.“). The registration and self-certification can be completed online with U.K. tax authorities (HM Revenue and Customs). Failure to meet the July 6, 2015 deadline may result in losing tax advantages and incurring penalties. For more information on the U.K. share registration requirement, please see our prior post here.

Participants May Pursue Claims Against Employer for Disgorgement of Profits

An employer permitted participants in its 401(k) plan to transfer their account balances into the employer’s cash balance plan, where each participant’s account balance was based on hypothetical investments chosen by the participant. The employer was not required to and did not invest the trust assets in the investments chosen by the participants. The IRS determined that the transfers violated the anti-cutback provision in Code Section 411(d)(6) because the transfer eliminated participants’ actual separate accounts. Participants sued the employer for violating the parallel anti-cutback provision in ERISA Section 204(g)(1) and sought an accounting of the profits that the employer made on the spread between the plan’s actual investments and the hypothetical account balance investments. The U.S. Court of Appeals for the Fourth Circuit reversed the district court’s dismissal and reinstated the plaintiffs’ claims holding that financial injury is not a prerequisite for standing when the remedy being sought is disgorgement of… Continue Reading

Is Your ERISA Fiduciary Liability Insurance Up to Date?

ERISA fiduciary liability insurance policies protect fiduciaries and trustees of ERISA plans from personal liability. As fiduciary liability law changes, it is important to make sure that such policies cover the appropriate risks and to evaluate whether the coverages are sufficient and complete. Newer and more comprehensive policies not only cover breaches of fiduciary duty and administrative errors, but settlor and non-fiduciary functions and regulatory penalties as well. Companies should evaluate their policies and consider, depending on their needs, whether the following items are covered and/or should be covered under their policies: Coverage for costs and expenses of DOL and other regulatory audits/investigations. Coverage for claims involving settlor/non-fiduciary functions. Coverage for failures to comply with certain ERISA disclosure requirements. Coverage for ERISA 502(a)(3) equitable-relief claims. Coverage for non-exempt prohibited transactions under ERISA and the Internal Revenue Code. Coverage for plan benefit overpayments. Coverage to pay for costs involved in corrections… Continue Reading

SEC Publishes Analysis Related to Proposed Pay-Ratio Disclosure Rules

In 2013, the U.S. Securities and Exchange Commission (the “SEC”) issued proposed rules implementing Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires publicly traded companies to disclose (a) the median of the annual total compensation of all employees of the company other than the chief executive officer, (b) the annual total compensation of the company’s chief executive officer, and (c) the ratio of (a) to (b) (the “Pay Ratio”). The Pay Ratio disclosure would be required in any annual report, proxy statement, or registration statement that requires executive compensation disclosure pursuant to Item 402 of Regulation S-K. In response to comments received with respect to the Pay-Ratio proposed rules, the SEC’s Division of Economic and Risk Analysis (“DERA”) published an analysis on June 4, 2015, which considers the potential effects on the Pay Ratio of excluding different percentages of certain categories of employees, such… Continue Reading

Affordable Care Act FAQs: Cost-Sharing Limitations and Provider Non-Discrimination

The DOL recently released a new set of Frequently Asked Questions (“FAQs“) related to the implementation of the Affordable Care Act (the “ACA“). In these FAQs, the DOL clarified that (1) the self-only annual limitation on cost sharing applies to each individual covered under family coverage and (2) this embedded deductible must be applied beginning with the 2016 plan year.  The FAQs also state that the ACA’s prohibition of discrimination against health care providers who are acting within the scope of their license or certification will not be enforced against a group health plan or health insurance issuer so long as the plan or issuer is applying a good faith, reasonable interpretation of the ACA’s nondiscrimination requirement. The FAQs are available here.

Supreme Court Confirms Ongoing Duty to Monitor Investments

In Tibble v. Edison International, announced on May 18th, the U.S. Supreme Court confirmed that fiduciaries have an ongoing fiduciary duty to monitor investments in retirement plans and to remove imprudent investments.  The Court held that fiduciaries will not avoid potential liability simply because the six-year ERISA limitations period has run from the time the investment alternative for the retirement plan was originally selected, even if that original selection was prudent.  The Court did not provide any further guidance on what the “duty to monitor” entails and instead remanded the case to the lower court to determine whether the fiduciaries in the case satisfied their duty to monitor.  The opinion can be found here.

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